Mr. Gardiner:
I am grateful to the right hon. Gentleman for giving way, especially in view of the time limit.

I have been listening carefully to the right hon. Gentleman. Surely he would accept that, especially in the case of the two companies in the telecoms industry to which he has referred, other extremely significant factors had a far greater impact. For example, they over-extended themselves in the amounts that they paid for band wave. To blame the whole fall in share price on the introduction of the ACT regulations is beyond the pale.

Mr. Redwood:
The hon. Gentleman has not been listening. In the case of Vodafone and BT, I have been putting more blame on the tax raids specific to the telecoms industry in the United Kingdom. The UK raid had the biggest impact on Vodafone and BT. Furthermore, it was mimicked in Germany, which did not help. As I explainedif the hon. Gentleman had been listeningthe fall in Vodafone and BT was far greater than the amount I should have expected as a direct result of the Chancellor's actions. My modest calculation blames the Chancellor for £90 billion of the fall. A lot of that loss was incurred by British pension funds, so they will find it difficult to pay the pensions[Interruption.] Labour Members seem to think this is great fun, but I warn them that many of their constituents are members of those schemes. Many of their constituents who do not have high incomes depend on those schemes for their future earnings in retirement.

Many people out there with modest life prospects and far less generous pensions than we receive in this place, courtesy of the taxpayer, must today face up to a crisis. Perhaps their scheme has been closed to new members, perhaps its terms are being worsened, or perhaps it is being wound up because it cannot meet its obligations. That is happening because of the combined effect of taking money away from pension funds, taking money away from companies and the dramatic reduction in share prices.

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Of course, international factors affect share markets, too, but much of the drop in British stocks and shares has been made in 11 Downing street by a Chancellor of the Exchequer who did not know when to stop taking money away from people. That is a disaster for pensions and for savers, and it goes some way to explain why the savings rate is so low and why companies such as Caparo, which is presided over by a chairman who is a Labour peer, must face extremely difficult choices, which I am sure that they would prefer not to face. The money is running out, the shares are not worth enough, the incomes are not flowing in, the Chancellor has squeezed the pips too much and it is beginning to hurt very badly.

The Government have launched new types of pension: stakeholder pensions. Many people think that they are mistake holder pensionsthey do not seem popular, and they do not seem to be touching the parts of the income scale that they were designed to help. They, too, will struggle for exactly the same reason. The Government are creating an atmosphere that is hostile to enterprise, to profits and to dividends. I fear that the market has not yet adjusted fully to the massive national insurance hike coming next year. Let us hope that it has discounted some of it. Some £8.6 billion a year will go out of companies. Let us say that half that£4.3 billionis directly attributable to and payable by the leading companies quoted on the stock exchange. One would expect a further £50 billion or £60 billion to be wiped off share values as a direct result of that money going out of companies.

Do the Government care? Will they cancel the measure at the last minute? Do they not see that a tax on jobs is the last thing that is needed in the current parlous situation? Pensions are in a funding crisis, much of which is the result of bad policies at No. 11 Downing street.

6.12 pm

Mr. Terry Rooney (Bradford, North):
It is good to see that Vulcan economics lives on. There is a danger in debates of this nature that we try to resolve policies on the basis of the last three weeks' headlines. Much of the Opposition's contribution has been on that basis. Given the nature of the subject, however, we need to take an extremely long-term perspective on pensions and on how people arrive at the pensions entitlement.

Looking back, the biggest single advance in pension provision for the majority of people was probably made by the 1975 changes that introduced SERPS. For the first time, compulsion was introduced into the system for a second pension. Of course, many of the benefits that accrued from that were wiped out by the disastrous changes that took place in the mid-1980s. Notwithstanding that, people retiring today who have contributed only to SERPS on fairly average earnings are getting about £60 a week extra. In half a working life, that is a significant advance, which should not be knocked.

If we consider the three different elements of the state second pension, personal pensions and occupational schemes, the biggest disaster for occupational schemes was caused by the 1988 changes, which led to 2 million people coming out of occupational pension schemes, becoming the victims of mis-selling, and, to date, receiving £13 billion in compensation. With the best will in the world, taking £13 billion out of the asset base of pension companies has an effect on their reserves and on the amount that they can afford to pay out in future years. That has also had a significant impact on, for example, so-called low-cost endowment policies.

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Ultimately, the key must be a significant element of compulsion as well as a significant incentives arrangement. Most people do not know about the incentives that already exist in the schemes. They are totally unaware, for example, of the national insurance rebates and tax relief on contributions, which are not sold well enough. That is partly because the whole focus and emphasisespecially following the 1988 changesis on the personal pension. That puts the public in the hands of dodgy sales people who are not driven by the future needs of those to whom they are selling but by commissions.

The sad thing about personal pensions is that so many are taken out and cancelled in the first three years, at which point the individual concerned has lost every penny that they have put in, as it has been wiped out by charges and so on. As the hon. Member for Bournemouth, West (Mr. Butterfill) highlighted, the beauty of the stakeholder pension scheme is that it has fixed those costs and driven them down across the entire life assurance sector. They will never return to their previous levels.

Mr. Arbuthnot:
The hon. Gentleman makes a good point about driving down costs generally. Is it not a real problem that some costs have been driven down so far that many of the new stakeholder pensions are being issued at a loss? That is not sustainable, and it cannot continue.

Mr. Rooney:
I would always call into question people like pension providers and the Association of British Insurers when they start talking about losing money, in the same way as I question their definition of the shortage in pension provision, bearing in mind how much of that they will want to keep for themselves. We need to recognise that they are seeking business. None of the big providers of stakeholder pensions has stopped selling themthat is the acid test. When they stop selling them, there may be a problem, but they are all in the market, and they all want them. A key change has been made to what used to be an evil level of charges. That regime has gone for ever. Charges have been fixed at 1 per cent., which everybody said could not be done. Magically, however, once the change comes into force, the market adapts. That key change must be driven through.

Nobody has so far had the courage to grasp the balance between incentives and compulsion. That is a massive challenge for Governmentto grasp the nettle of compulsion while being brave enough to match that with incentives that add up to a decent package. Young peopleespecially those under the age of 25are, and always have been, a phenomenal problem. At that age, they are first setting up home, getting married, having children, and buying their first three-piece suite. If one tries to explain to them the necessity of starting pension provision, one finds that the issue is so far over their horizon it is not even on their radar. That is always a problem with occupational schemes, as young people have the option of whether to join up to the age of 25. One cannot get them to join. They say, "What's in it for me? Do you want me to lose 5 per cent. of my salary at a time when I have all these expenses, all these bills?" There must be an element of compulsion that matches that in the state second pension. The carrot must be equal to the stick, however, to give people genuine hope and a reason to save at the appropriate levels.

I am sorry that the hon. Member for Bournemouth, West has left the Chamber, as he has an incredible faith that pension providers will make the right decisions. In

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1988, a major pension fund manager in charge of about £44 billion of funds decided to opt out of the equities market totally, and to convert all its funds into cash holdings. Over the next three years, it lost £7.5 billion of income for the funds that it managed.

There are some incredible differences in the track records of pension providers and insurance companies. The returns of some of themit is the same companies year after yearare such that they should be closed down and barred from the investment business. In general, those companies have paid the highest levels of commission, but their returns are horrendous. There can be as much as a 70 per cent. gap between the best and worst investment houses. The Government need to examine that structure.

It has been only 10 years since the House clamoured for a raft of regulations on pensions to stop the practices that occurred in the Maxwell scheme. There is a great danger in getting rid of all regulation to simplify matters. We only need to lose 1 per cent. of £870 billion, or whatever the figure is, through abuse or weak regulation to have a serious problem. We know what happened with WorldCom and Enron and should be alive to the fact that there are people in this world who will seek any opportunity and use any means available to deprive other people of their money.

It will always be the case that the private sector has cleverer lawyers and accountants than the Government. We need an appropriate level of regulation to protect the interests of our constituents and their future. A landmark judgment by the European Court of Justice in 1994 has not been translated into legislation. The Coloroll judgment said that pensions are deferred wages: they do not belong to the employer or the pension provider but are the property of the individual. Individuals need to know that the state will provide the appropriate regulation to protect their funds so that when they retire they get not a shock but a pension.